Health. Savings. FAQs. The following are frequently asked questions and answers regarding the Health+Savings Option in the BP Medical Plan.

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1 Health Savings FAQs The following are frequently asked questions and answers regarding the Health+Savings Option in the BP Medical Plan. Note: Health Savings Account (HSA) tax laws vary by state. You might also seek the advice of a tax advisor regarding the features and tax savings provided by Health Savings Accounts. More information is also available on the IRS website.

2 Q. What is the Health+Savings Option? A. The Health+Savings Option is a high deductible health plan (HDHP) that offers comprehensive medical coverage when you need it. Enroll in this plan and you ll pay a lot less in monthly premiums than you would in other medical options 60% less in exchange for having a higher deductible amount. Plus, the Health+Savings Option comes with a Health Savings Account (HSA), which is a tax-preferred account that you will own and that will help you save for future health expenses. Q. What is an HSA? A. The Health Savings Account (HSA) is a bank account that works with your health plan. Administered by PayFlex, a subsidiary of Aetna, it works like the Health Care Spending Account (HCSA) in that you can contribute and use before-tax dollars to cover the cost of eligible health care expenses. But unlike the HCSA, you can invest your HSA money in mutual funds to grow your savings. Plus, the earnings you make on your investment are tax-free. That s triple the tax savings! What s more, you never forfeit your contributions to the HSA. Unused money will carry over from one year to the next, enabling you to build a reserve for future expenses. And you get to keep all of the money in your HSA year after year, even after you ve left BP. Q. How do HSAs and medical plans work together? A. HSAs are available to help you pay for health care expenses associated with high deductible health plans (HDHPs), such as the Health+Savings Option. You can use the money in your HSA to pay for eligible health care expenses, or you can choose to save your funds for the future. Once you meet the deductible, your medical coverage will work like a traditional health plan and start covering a portion of the costs. Remember, you can contribute to an HSA only if you participate in an HDHP. Q. How do I open an HSA? A. When you enroll in the Health+Savings Option, Aetna (the BP Medical Plan administrator) will send your information to PayFlex (our HSA administrator), and PayFlex will set up your account. You will then receive a welcome letter. After undergoing and passing a customer identification process (CIP) as required by the Patriot Act, you will receive a welcome letter and debit card from PayFlex as confirmation that your HSA has been established. In some cases, PayFlex may request that you verify personal information (e.g., Social Security number, home address, date of birth) before opening your HSA. 2

3 Q. Can I enroll in the Health+Savings Option but not the HSA? A. Yes. However, please note that while you are not required to open an HSA, for administrative reasons, PayFlex will create an HSA account on your behalf when you enroll in the Health+Savings Option. If you do not wish to maintain the account, simply contact PayFlex to close the account. Eligibility Q. Who s eligible for an HSA? A. You are eligible for an HSA if you are: Covered by a high deductible health plan, such as the Health+Savings Option Not covered under a non-high deductible health plan (including a plan your spouse/domestic partner may have) Not enrolled in a Health Care Spending Account (including an account your spouse may have with BP or a separate employer) Not enrolled in Medicare Not eligible to be claimed as a dependent on another person s tax return Q. My spouse has other medical coverage. Can I cover him or her under the Health+Savings Option? A. Yes. Q. My spouse has a Health Care Spending Account. Can I open an HSA? A. No. If your spouse participates in a Health Care Spending Account that is not a Limited-Purpose HCSA, you will not be eligible to open an HSA. Federal regulations do not allow you to contribute to an HSA if your spouse has an HCSA (also known as a health care flexible spending account). Q. My spouse has a Limited-Purpose Health Care Spending Account. Can I open an HSA? A. Yes. If your spouse participates in a Limited-Purpose HCSA, which is a special type of spending account that covers only dental and vision expenses, you are eligible to open an HSA. 3

4 Q. My spouse is enrolled in Medicare. Can I contribute to a Health Savings Account (HSA)? A. Yes. You can contribute to an HSA and use your HSA contributions to pay for your spouse s qualified expenses. Q. Can I have an HSA and a Dependent Care Spending Account? A. Yes. Dependent Care Spending Accounts are for day care expenses and not for medical care. Please note, as a retiree, you are not eligible for the BP Dependent Care Spending Account. However, if your spouse has a Dependent Care Spending Account, you can also have an HSA. Q. Can I have an HSA and an IRA? A. Yes. Q. Can my spouse have an HSA too? A. Yes. If both you and your spouse have individual high deductible health plan coverage, you may each be able to contribute to your respective HSAs, up to the limit for individual coverage (the annual IRS limit for 2015 is $3,350 each). However, if one or both of you have family coverage in a high deductible health plan, the maximum combined before-tax contribution cannot exceed the annual IRS limit of $6,650 for family coverage. If you are age 55 or over this year, you can make the $1,000 catch-up contribution. This is also true for your spouse if he or she is age 55 or over this year. Your spouse would have to make the catch-up contribution to his or her HSA, not to your HSA. Please note that, due to ongoing issues of federal law, the answer only applies to a legal spouse of the opposite sex in states that do not recognize same-sex marriage. A legal spouse of the same sex as the retiree must still be considered a domestic partner under federal tax rules in those states. This area of the law is in flux, however, and is thus subject to change with little or no notice. Additionally, if you are a domestic partner of a BP employee, you are required by law to open a separate HSA if you want to make HSA contributions. Q. Can my domestic partner have an HSA too? A. Yes. If you both have a high deductible health plan, you can contribute up to the limit for individual coverage ($3,350 each) or up to the family limit ($6,650). Note: The ability to contribute up to the family limit depends on whether you each have federal tax-qualified dependents. 4

5 Q. Can I combine an HSA from a former employer with my PayFlex HSA? A. A Trustee Transfer form can be accessed directly at or via the Aetna Navigator member website at Building your HSA Q. How does my HSA grow? A. Your HSA grows from: Any contributions you decide to make (must be claimed on your annual tax return) Tax-free interest earned on your account Any investment earnings (when your account reaches $1,000, you can open an investment account) Q. How much will BP contribute to the HSA? A. BP will not make contributions to retiree HSAs. Q. How much money can I put into my HSA? A. For 2015, the IRS allows you to contribute up to $3,350 for Personal coverage and up to $6,650 for Personal + dependents coverage. If you re over age 55, you re also eligible to make an additional $1,000 catch-up contribution per year to your HSA. Because BP s plan year is April 1 through March 31, you can make contributions according to the last-month rule. Q. What is the last-month rule? A. BP s benefits plan year is April 1 through March 31. Even though you weren t eligible to contribute from January through March, the last-month rule states that, as long as you re eligible for an HSA on December 1, you can contribute to your HSA, up to the maximum annual limit for the calendar year. However, the IRS requires that you continue to be eligible through December 31 of the following year. This is called the testing period. If you fail to remain an eligible individual during the 13-month testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA that would not have been made except for the last-month rule. You include this amount in your income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. For more information, please consult your tax advisor or see IRS Publication

6 Q. What if I contribute more to my HSA than the IRS allows? A. You will be required to pay income taxes on the excess and any earnings. If you do not withdraw your excess funds before the tax-filing deadline (usually April 15 of the following year), you will also be subject to an excise tax. You can contact PayFlex for assistance in withdrawing excess funds before the deadline to avoid potential tax penalties. Q. Are HSA rules similar to the IRA rule that I can make a deposit into my HSA up to April 15 and have it count toward my prior-year tax return? A. Yes, as long as you did not contribute up to the maximum in the prior tax year. Q. Where can I find more information about how contributing to an HSA affects my taxes? A. Visit the site at or via the Aetna Navigator member website at Q. How do I make contributions to my HSA? A. Contributions will be on a post-tax basis and can be set up automatically when you link your personal savings account with your HSA on Aetna Navigator, or you can mail a deposit coupon directly to PayFlex, our HSA administrator. Q. How often can I contribute to my HSA? A. You can contribute frequently or all at one time, provided your total contribution does not exceed the IRS annual limits. Q. Can I make changes to the amount I contribute to my HSA during the plan year? A. You can start, stop or change your contribution to your HSA account at any time. 6

7 Q. Do I have investment options for my HSA balance? A. Once you have a balance of $1,000 in your HSA, you can open an investment account. You can invest any of your HSA funds over this $1,000 in an array of mutual fund options. To invest your funds, you must maintain a balance of at least $1,000 in your HSA. If you need funds to pay for an eligible expense, you can always transfer funds back to your interest-bearing account. Note: Investments are not FDIC-insured. By transferring funds into an HSA investment account, you can potentially benefit from capital appreciation in the value of mutual fund holdings. However, you will be exposed to a number of risks, including the loss of principal. To familiarize yourself with these risks, you should always read the prospectus for the mutual funds you intend to purchase. Once you have funds in investments, you will pay a monthly account fee of $1.50. This fee will automatically be deducted from your cash account. Q. Once I have $1,000 in my HSA, can I preset future allocations into my investment and/or interest-bearing accounts? A. Yes. You can preset your allocations by logging on to the Aetna Navigator member website via LifeBenefits and following these steps: Select Health Savings Account Click Investments Click View Investment Account Select Manage My Account from the top navigation Click Invest New Contributions on the left navigation From here, you can input your preferred percentage values and then click Submit Q. Can I use funds from my investment account to pay for health care expenses? A. No. Funds in the investment account cannot be used to pay for health care expenses. You must use money in the interest-bearing account only. 7

8 Spending your HSA Q. How can I spend my HSA? A. PayFlex will send you an HSA debit card that makes it easy to access your HSA money. All you have to do is swipe the card for eligible health care expenses, and the funds will be taken directly from your account. If you aren t required to make a payment at the point you receive the service, you should wait for the claim to be processed through the claim system. The doctor s office will send you a bill requesting payment for the difference between the billed charges and the amount covered by your health plan. You can write your HSA debit card number on the doctor s bill and submit it as payment, or you can pay for the expense out of pocket and reimburse yourself later. To pay for health care expenses directly from your HSA, log on to Aetna Navigator to access your HSA account and sign up for Make a Payment on the HSA website. You can also transfer funds from your HSA to your personal bank account. Make sure to keep your receipts for all expenses, in case you are audited. Q. Can I request additional debit cards one for me and one for my spouse? A. Yes. You can request additional debit cards by logging on to the Aetna Navigator member website via LifeBenefits. Q. What is the earliest I can begin paying claims with my HSA? A. You can use your HSA for eligible expenses that you incur after you have established your HSA. This means that the date of service for the expense must be on or after the date your HSA becomes effective. Expenses that you incur before you open your HSA are not eligible expenses. 8

9 Q. Can I use both my HSA and Retiree Reimbursement Account (RRA) to pay for health care expenses? A. If you are enrolled in one of the Health+Savings Options with the Health Savings Account (HSA) for retiree medical coverage before you become eligible for Medicare, your RRA may be used only for certain types of expenses, as follows: Until you meet your deductible, your RRA can be used only for certain types of expenses, including Medicare premiums and eligible out-of-pocket vision, dental and preventive care expenses. Note: Medicare premiums can only be for your spouse or eligible dependent, as you cannot be covered under Medicare and also contribute to an HSA. Your RRA cannot be used to reimburse you for your deductible. You can use your HSA to pay for all out-of-pocket eligible medical expenses. You cannot be reimbursed from both accounts for the same expense. Once you meet your deductible, the RRA can reimburse you for all eligible medical expenses you and your eligible spouse and dependents incur. Q. Does my HSA have to have the money in it before I use it on eligible medical expenses? A. Yes. Your HSA is a personal account in your name and is administered by PayFlex, a subsidiary of Aetna. The funds must be in your account before you can pay for an expense. Q. What if funds are not available when I have an eligible medical expense? A. If you do not have enough money in your HSA to pay for an eligible medical expense, you ll need to pay for the expense by some other means. Once the money is in your HSA, you can reimburse yourself for the amount you personally paid for the expense. Q. What can I spend my HSA on? A. You can use your HSA for eligible health care expenses for you, your spouse or your dependents (even if they re not covered under the Health+Savings Option), as defined by IRS Code Section 213(d). The law states that the expense must be primarily to alleviate or prevent a physical or mental defect or illness. Examples include prescriptions, doctor office visits, and vision and dental care. You can also spend it on some health care expenses not covered by your health plan, such as glasses and contact lenses, but it will not count toward your deductible. For a complete list of eligible expenses, go to or Examples of expenses that do not qualify include most cosmetic surgery, health club dues, maternity clothing and toiletries. 9

10 Q. Can I spend my HSA on non-health care expenses? A. No. If you use your HSA for expenses other than eligible health care expenses, you automatically subject yourself to IRS penalties, which have increased to 20% of the total ineligible withdrawal. These expenses are considered taxable income (much like an early withdrawal from a 401(k)). You must report these withdrawals accordingly. Keep in mind that the inappropriate use of your HSA may leave you without available funds for future medical expenses. The 20% penalty does not apply if the withdrawal is made after you: Turn age 65 Become completely and permanently disabled Die Q. Can I use my HSA to pay insurance premiums? A. Generally, insurance premiums are not an eligible medical expense for your HSA. However, premiums for the following are eligible expenses: Long-term care coverage Health care coverage while you receive unemployment benefits Health care continuation coverage required under any federal law (e.g., COBRA) Retiree insurance premiums (other than premiums for a Medicare supplemental policy, such as Medigap) if you are age 65 or older Q. Who is responsible for ensuring that I am using my HSA for eligible medical expenses only? A. How you use your HSA is solely between you and the IRS. You should save all receipts, invoices and statements that provide evidence for how you used your HSA, in case you are audited. By law, BP cannot ask you to substantiate your reason for withdrawing money from your account; therefore, you will be responsible for improper withdrawals. And remember, the penalty for improper withdrawals is 20% of the amount withdrawn. 10

11 Q. Who can I spend my HSA on? A. You can use your HSA to pay for eligible health care expenses for: Yourself Your spouse, even if he or she is not covered by a high deductible health plan (domestic partner expenses are generally not eligible for reimbursement) Anyone you claim as a dependent on your personal income tax, even if that person is not covered by a high deductible health plan However, you cannot spend your HSA on eligible expenses for dependent children between ages 24 and 26. While health care reform changes mandate that children up to age 26 can be covered by your medical plan, they are not considered dependents for tax purposes. Q. Can my HSA be used for dependents not covered by my health plan? A. Yes, as long as the expense is eligible (e.g., copays, deductibles and coinsurance) and not paid for by another health plan. Dependents include anyone you claim as a dependent on your personal income tax and who is under age 24. Q. What happens to my HSA when I reach age 65? A. You can no longer contribute to your HSA if you enroll in Medicare. However, you can continue to use your HSA for eligible health care expenses, including retiree Medicare premiums, deductibles, copays, coinsurance and any other retiree insurance premiums (other than premiums for a Medicare supplemental policy, such as Medigap). Once you turn age 65, you can also use your HSA to pay for things other than eligible health care expenses. The money used will be taxable as income, but it will not be subject to the 20% penalty. Q. Is there a time limit for reimbursing myself from the HSA? A. No. There is no time limit on HSA reimbursements. 11

12 Maintaining your HSA Q. How can I track my HSA balance? A. You will have access to your account online through or via the Aetna Navigator member website at When you log on, you can track your expenses, claims and account balance. Q. What happens if I have money left in my HSA at year-end? A. Just like a bank account, any money left over at the end of the year will be yours to keep, no matter what. Whatever funds you don t spend in one year remain in your HSA, earn interest and are available for withdrawal in a future year. Q. What happens to my HSA if I don t enroll in a high deductible health plan next year? A. If you are no longer covered by a high deductible health plan, such as the Health+Savings Option, you cannot continue to contribute to your HSA. However, the account is still yours and you can use the money to pay for eligible health care expenses or save it for future medical expenses. Q. Can my HSA money be rolled into an IRA? A. Not without incurring tax consequences. The only way to avoid those would be to roll it into another qualified HSA. Q. What happens to my HSA if I die? A. Like your other assets, your HSA will go to your legal beneficiaries. You need to complete a beneficiary designation form that states to whom your account should be transferred in the event of your death. If your beneficiary is your spouse, the HSA will not be taxable to your beneficiary if the funds are used for qualified medical expenses. However, if your beneficiary is not your spouse, the HSA distribution will be taxable. You can select a beneficiary online or request a form when you log on to the Aetna Navigator member website via LifeBenefits. Q. What would cause my HSA to terminate? A. PayFlex will close your HSA only at your request. 12

13 Q. Is my HSA protected from fraud? A. Yes. Subject to the terms and conditions of the cardholder agreement, if your HSA debit card is stolen or you suspect fraudulent activity, PayFlex will immediately replace your funds and work to resolve the issue. In the event of fraud, your account will be treated just like your checking account. Q. Do I have to pay maintenance fees on the HSA? A. Yes. Retirees and domestic partners will pay all fees associated with their HSAs. These include the monthly maintenance fee, any investment fees, and fees for optional services such as monthly paper statements for your account. Some fees may apply based on how you use your account. For more information, go to Aetna Navigator. Select the link to access your HSA, and click the fee schedule link on the left hand side of the HSA page. Medical coverage Q. Are preventive services covered? A. Yes. Routine preventive care services performed by network providers and certain generic preventive prescription medications are covered at 100% without your needing to meet the deductible first. For information about covered preventive services, go to bp.com/lifebenefits and access the BP Medical Program section in the Benefits Handbook. Q. What makes a drug a preventive drug, and what are some examples of the generic preventive drugs covered at 100% under the Health+Savings Option? A. Preventive prescription drugs that can help you avoid developing a health condition are considered preventive prescription drugs. They can help you maintain your quality of life and avoid expensive treatments, helping to reduce your overall health care costs. A list of generic preventive prescriptions is available on the Express Scripts website. Go to LifeBenefits and click Express Scripts under the Contacts tab. Q. What else is covered? A. After you meet your deductible, the plan will pay benefits for covered services. You ll receive higher benefits when you seek services from network providers. You are required to pay the remaining amount up to your coinsurance maximum. For information about covered services, go to bp.com/lifebenefits and access the BP Medical Program section in the Benefits Handbook. 13

14 Q. How do I find a network provider? A. To see if your doctor or hospital participates, or to find a network provider, visit Q. Does the deductible apply toward my out-of-pocket maximum? A. Yes. This document is presented as a matter of information, and is not intended to constitute a promise or contractual commitment by the company. The company reserves the right to unilaterally change or terminate any or all of the programs discussed herein, as well as all of its benefit plans and programs, at any time and without prior notice. Also, modifications may be necessary to comply with applicable legal requirements. In the event of any inconsistency between a statement contained in this document and the relevant plan document or summary plan description, the plan document or summary plan description will control over this document. Employees covered by collective bargaining agreements will be subject to these benefit plan provisions to the extent consistent with the terms of BP s policy and benefit programs, the applicable collective bargaining agreement and any applicable legal guidelines. 14 REVISED FEB15/H+S_NMEOFAQ